Corporate governance is simply the way in which a corporation is governed. It is a system by which the companies are directed and controlled. This system makes the Board of Directors responsible for their company’s governance.
The board directors, managers, employees, and shareholders have a strong professional relationship. Corporate governance ensures Transparency, Accountability, and Security which are the basis for the understanding among the stakeholders.
Here, the rights of all stakeholders are recognized by the company and facilitate co-operation from all of them for the company’s development and financial stability.
Good corporate governance maintains investors’ confidence. Hence, capital raising is done efficiently and effectively. It also lowers the capital cost and has a positive impact on the share price. Thus it ensures corporate success and economic growth.
The fundamental objective of corporate governance is that it enhances shareholders’ value and the stakeholders’ interests are protected by performance improvement.
Various other elements that are considered and worked upon in corporate governance include rule of law, responsiveness, orientation towards consensus, Effectiveness, and Efficiency, Equity and Inclusiveness, and Participation, Discipline, Independence, Fairness and Social responsibility.
A company that takes care of these different elements of corporate governance is sure to outperform other companies. They will be able to attract more investors which aids in further growth of the finance of the company.
Corporate governance, through mutual agreements, respects the rights of shareholders and investors that are established by law.
Corporate governance is actually a framework of rules and procedures through which, enterprise decisions are made and the controllers are held accountable for their decisions.
A set of corporate governance principles was developed and endorsed by the ministers of ‘The Organisation of Economic Cooperation and Development’. Accordingly, Corporate governance will promote transparent and efficient market-based valuations and also be consistent with the rule of the law. It will clearly articulate the supervisory, regulatory and enforcement authorities through the division of responsibilities.
The rights of the shareholders will be protected. These include ownership registration, share transfer, timely update of information on the corporation, participation in shareholder meetings, voting, and sharing the profits of the corporation.
It also ensures all shareholders, including minority and foreign shareholders, are treated equally and have effective redress for any violation of their rights. Self-dealing and Insider trading shall not be permitted. It also prohibits the key executives and members of the board to carry out transactions that directly affect the corporation.
The corporate governance framework encourages active co-operation between corporations and stakeholders to create jobs, wealth and financial sustainability.
It also ensures accurate and timely disclosure of all material matters related to the corporation which includes ownership, performance, financial situation, and governance of the company are made available.
The effective monitoring of management by the board, the board’s accountability to the company and shareholders and strategic guidance of the company are all also ensured by the corporate governance framework.
Make sure that your company adheres to all the rules of corporate governance so that everything is legit.
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